McDonald's Suing Ex-CEO For Having Sexual Relations With Employees

Daniel Fowler
August 13, 2020

The lawsuit reads: "An internal investigation into this allegation discovered photographic evidence that, while he was CEO, Easterbrook had engaged in a physical sexual relationship not only with Employee-2, but also with two other company employees in the year before his termination".

The evidence also shows Mr Easterbrook approved a special discretionary grant of restricted stock units worth hundreds of thousands of dollars to one of the employees after their first sexual encounter - and just days before their second, the company said.

McDonald's is suing its former CEO Steve Easterbrook alleging that he covered up evidence to the company's board about his relationships with employees. In the current lawsuit, the company said they had noticed dozens of sexually explicit photographs and videos of various women, including pictures of the company employees.

Steve Easterbrook, the former CEO of McDonald's, is being accused of lying about having sexual relationships with subordinates.

As part of the terms of his exit, Easterbrook was promised 26 weeks severance pay, in addition to prorated bonuses as warranted.

McDonald's is looking to regain the tens of millions in severance and benefits that he received, claiming he lied about other relationships he had with employees prior to being terminated in November, according to The Wall Street Journal. But, McDonald's board didn't investigate Easterbrook's behavior as "hard as they should have" when he was sacked without cause. "McDonald's does not tolerate behavior from any employee that does not reflect our values".

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Tim Hubbard, an assistant professor of management at the University of Notre Dame's Mendoza College of Business, said firing a CEO with cause can lead to protracted, expensive legal battles, which is why boards try to avoid it. Easterbrook's case seemed clear-cut, he said.

McDonald's did not state why the servers weren't checked during the initial investigation and relied on Easterbrook to be truthful. The former CEO allegedly removed the evidence before he was sacked to prevent investigators from discovering it. Easterbrook was let go back in November after acknowledging that he exchanged videos and text messages during a non-physical, consensual relationship with an employee.

Some shareholder groups had criticized the board's decision to categorize the firing as without cause despite conduct that violated longstanding company policies forbidding relationships with direct and indirect reports.

Easterbrook's separation agreement included six months' severance pay, plus stock options. Total compensation, including equity awards, amounted to $17.4 million in 2019.

One day after Mr Easterbrook's departure, McDonald's announced that its top human resources executive, David Fairhurst, who joined McDonald's in 2005 and was named chief people officer at the restaurant chain in 2015, had also left. Kempczinski's announcement was sent out to employees on Monday.

"We will thoroughly investigate any information and take serious and decisive action to hold those accountable for wrongdoing, no matter what", Ms. Capozzi wrote in an email viewed by the Journal.

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